Sewer rate hike might not be needed for Kingman customers

KINGMAN - A 25 percent hike on wastewater rates for 2013 may seem like a foregone conclusion, but it's not, according to City Councilman Richard Anderson.

"I can't honestly say one way or another if the fund needs to have the rates raised this year," Anderson said.

Anderson said he needs more data to analyze whether or not there's an actual need for a rate increase in 2013. The rest of Council voted in favor of moving forward with the rate-increasing process.

It comes down to what's in the wastewater enterprise fund, whichcontains the money for loan payments and operations, at the end of each fiscal year, he said. The ending balance gets carried over to next year's fund.

At the end of fiscal year 2011, it was at about $1.5 million, Anderson said. Then at the end of fiscal year 2012 - this last June - the balance was $1.2 million. However, the September City Manager's Report says the fund started fiscal year 2013 with $2.5 million.

"That's significantly better than $1.2 million," Anderson said.

Anderson wants to see the exact number for 2012's ending balance. He doubts, based on the data he's seen, the proposed increase is needed.

"Unless you have the necessary data, you're making guesses," Anderson said. Maybe there is a need for another increase, but the preliminary data doesn't support an increase, he said.

On Tuesday, Council voted 6-1 to issue a notice of intent to raise wastewater rates. Anderson voted against the motion.

The city needs to collect about $7 million annually from ratepayers for both treatment plants. Of that, $4 million is dedicated to the debt payment for the city's two wastewater treatment facilities, $775,000 for debt reserve, around $2 million for operations and $125,000 for contingency.

The rate increase would bring in approximately $1.2 million, but Anderson argues that if the fund is between $1 million and $1.3 million better off than expected, there's no need for an increase.

If the rate increase is approved and takes effect in January, it'll look different to different types of customers based on consumption, said Coral Loyd, Kingman's finance director. But for typical residential customers who use about 6,150 gallons of water a month, their wastewater bills would increase from roughly $50 a month to a little over $62.

Also, this is the last scheduled rate increase for wastewater customers, Loyd said.

When Anderson asked Loyd if a 25 percent increase is really needed, considering the changes to operations, she replied that it's a good idea to move forward with the plan at least until construction is finished on the Downtown Wastewater Plant.

She agreed that the city is getting close to achieving what it set out to do when it took out the $55 million loan to construct the plants but maintained that it's in the best interest of the city to implement this last increase.

"We can always do a rate reduction later," Loyd said.

The incremental increases allowed the city to make its first debt payment and ensure that it can continue doing so over the life of the 20-year loan.

Even if it's decided that a rate increase is not needed this year, it's likely that at some point an increase would be needed. However, if more people were to connect to the system, the burden to pay back the loan would be spread among more people and would likely decrease rates.

City staff came up with several ideas to save money in the long run.

One was the decision to compost biosolids from the two plants with tree trimmings and use it as fertilizer at the golf course and parks. This should save the city $170,000 every year in tipping fees.

A public hearing to discuss the potential wastewater rate increase is set for Nov. 20, but there are plans to talk about some of Anderson's concerns at the first meeting in November.